Legislators try again to tax e-cigarettes

Legislators are trying again this year to tax "electronic smoking products"- e-cigarettes and vaping devices - the same as tobacco products.

Bills to extend the state's tobacco tax to electronic smoking products died last March as lawmakers rushed to close down the session amid the start of the pandemic. Kodiak Sen. Gary Stevens and Juneau Rep. Sara Hannan are trying again this year.

Their bills have each cleared their first committee and are both waiting for a hearing in their respective Finance Committee before either could move to the full body for a vote.

Currently, the state does not tax e-cigarettes, vapes and the like. The state tax on a pack of cigarettes is $2. The tax on loose tobacco and chewing tobacco is 75% of the wholesale price.

Extending that same 75% tax rate to the wholesale price of electronic smoking products would raise about $2.5 million a year for the state treasury, according to the Department of Revenue.

Cities and boroughs in Alaska are allowed to levy their own tobacco taxes, including on e-cigarettes. The Matanuska-Susitna Borough has taxed electronic smoking products at 55% of the wholesale price since 2015. Juneau and Petersburg also tax e-cigarette products.

Wrangell collects an excise tax on marijuana growers but does not impose any additional tax on tobacco products other than the standard sales tax.

The state legislation also would prohibit the online sale of electronic smoking products to individuals.

And the legislation would amend state law to bring it in conformity with a 2019 federal law that sets 21 as the minimum age to buy tobacco, nicotine or electronic smoking products. The minimum age is 19 in Alaska law.

Besides the tax revenues and following federal law, there is the health benefit of the legislation, Hannan said last Friday, "knowing that young people are price sensitive"and that the higher price may dissuade some from taking up the habit.

Preventing illegal sales to underage buyers "is a critical part of the overall effort to prevent and reduce youth smoking,"Stevens said in his sponsor statement in support of the Senate version of the bill.

A 2017-2018 National Youth Tobacco Survey reported e-cigarette use among high school students jumped from 11.7% to 20.8%, Stevens said in his statement. Taxing e-cigarettes and vape products, he said, would discourage teens from buying the products.

Supporters of the legislation include the Mat-Su Health Foundation, which said in an April 8 letter backing Hannan's bill: "Adolescents perceive e-cigarettes as safer than regular cigarettes, but it is a myth that these products are safe or that they are a (tobacco) cessation tool."

Opposition to the bills is coming from the electronic smoking industry, and from national anti-tax organizations such as the Taxpayers Protection Alliance and Americans for Tax Reform.

The Senate bill is "misguided legislation that would slap taxes on lifesaving reduced-risk tobacco alternatives such as electronic cigarettes,"Americans for Tax Reform said in a Feb. 15 letter opposing Stevens' bill. "If enacted, this anti-science bill would have a disastrous impact on businesses and public health throughout the state."

"The vaping industry is protecting its business interests,"the Mat-Su Health Foundation said in a March 18 letter in support of Stevens' bill.